Traders May Cash In On Recent Gains On Disappointing Earnings News

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to give back ground after moving sharply higher over the two previous sessions.

Traders may look to cash in on the recent strength in the markets amid lingering concerns about the outlook for interest rates and the economy.

The notable two-day rally seen last Friday and Monday lifted the Nasdaq and the S&P 500 to their best closing levels in over a month.

A steep drop by shares of 3M (MMM) may weigh on the Dow, with the diversified manufacturer plunging by 4.5 percent in premarket trading.

3M is under pressure after reporting weaker than expected fourth quarter earnings and providing disappointing guidance. The company also announced plans to cut 2,500 jobs.

Fellow Dow component Verizon (VZ) may also move to the downside after reporting mixed fourth quarter results and forecasting 2023 earnings below analyst estimates.

Shares of Johnson & Johnson (JNJ) are also seeing pre-market weakness even though the healthcare giant reported better than expected fourth quarter earnings and provided upbeat guidance.

Overall trading activity may be somewhat subdued, however, with a lack of major U.S. economic data likely to keep some traders on the sidelines.

Stocks moved sharply higher over the course of the trading session on Monday, extending the significant rebound seen last Friday. With the continued upward move, the Nasdaq and the S&P 500 reached their best closing levels in over a month.

The major averages pulled back off their highs of the session late in the day but remained firmly positive. While the Nasdaq soared 223.98 points or 2.0 percent to 11,364.41, the S&P 500 jumped 47.20 points or 1.2 percent to 4,019.81 and the Dow climbed 254.07 points or 0.8 percent to 33,62.56.

Technology stocks helped lead the markets higher once again, contributing to the standout gain by the tech-heavy Nasdaq.

Within the tech sector, semiconductor stocks turned in a particularly strong performance, driving the Philadelphia Semiconductor Index up by 5.0 percent to a five-month closing high.

Chipmaker Advanced Micro Devices (AMD) spiked by 9.2 percent after Barclays upgraded its rating on the company’s stock to Overweight from Equal Weight.

Significant strength was also visible among computer hardware stocks, as reflected by the 3.6 percent surge by the NYSE Arca Computer Hardware Index.

Networking and software stocks also saw considerable strength, while banking and transportation stocks turned in some of the best performances outside the tech sector.

The extended rally on Wall Street came even as traders looked ahead to the release of earnings news from a number of big-name companies this week.

Reports on durable goods orders, fourth quarter GDP, new home sales and personal income and spending are also likely to attract attention in the coming days.

Commodity, Currency Markets

Crude oil futures are creeping up $0.14 to $81.76 a barrel after edging down $0.02 to $81.62 a barrel on Monday. Meanwhile, after inching up $0.40 to $1,928.60 an ounce in the previous session, gold futures are rising $8.40 to $1,937 an ounce.

On the currency front, the U.S. dollar is trading at 130.26 yen compared to the 130.67 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0873 compared to yesterday’s $1.0872.

Asia

Asian stocks rose broadly on Tuesday after Wall Street stocks ended higher overnight for a second straight session, fueled by a surge in technology stocks.

Most of the regional markets, including South Korea, Malaysia, Singapore, China, Hong Kong and Taiwan, were closed for the Lunar New Year holiday.

The dollar held near a nine-month low versus the euro and gave back recent gains against the yen as U.S. Treasury yields slipped amid expectations that the Federal Reserve will moderate its aggressive anti-inflation posture.

U.S. Treasury Secretary Janet Yellen on Monday said a strong labor market and easing inflation in the United States were “very hopeful signs.”

Japanese stocks rallied to lead regional gains, led by technology stocks. The Nikkei 225 Index jumped 1.5 percent to 27,299.19, marking its highest close since December 16 as investors braced for the earnings season.

The broader Topix closed 1.4 percent higher at 1,972.92. Tokyo Electron, Screen Holdings, Advantest and SoftBank Group climbed 2-3 percent.

GS Yuasa Corp soared 3.8 percent after the battery maker announced a joint venture with Honda Motor to develop cutting-edge lithium-ion batteries. Shares of the latter rose 1.2 percent.

Australian markets rose modestly to extend gains for a fifth day running, with miners and tech stocks leading the surge.

Financials came under selling pressure as a survey from National Australia Bank showed its index of business conditions fell 8 points to +12 in December.

The benchmark S&P/ASX 200 Index climbed 0.4 percent to 7,490.40, while the broader All Ordinaries Index added 0.5 percent to close at 7,710.50.

Myer Holdings surged 5.3 percent after the department store posted its strongest sales in almost 20 months in the five months ended December 31.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index slipped 0.1 percent to settle at 11,932.92.

Europe

European stocks have moved mostly lower on Tuesday as investors assess the outlook for economic and earnings growth.

The eurozone economy expanded in January for the first time in seven months, the results of a purchasing managers survey showed today, helping ease fears of an impending recession.

The S&P Global Flash Eurozone PMI Composite Output Index, which gauges activity in the manufacturing and services sectors, increased to 50.2 from 49.3 in December, reaching the highest level since June.

Separate data showed the U.K. budget deficit widened to the highest December level on record largely due to a sharp growth in spending on energy support schemes and huge interest payments driven by high inflation.

Public sector borrowing increased by 16.7 billion pounds from the last year to 27.4 billion pounds in December, according to data published by the Office for National Statistics.

While the French CAC 40 Index is just below the unchanged line, the German DAX Index and the U.K.’s FTSE 100 Index are both down by 0.3 percent.

Brewing and pub giant Marston has moved sharply higher after reporting positive sales for the festive period.

Components and systems manufacturer Senior Plc has also surged after saying it expects annual profit to top consensus.

Meanwhile, Primark-owner Associated British Foods has fallen despite reporting a 20 percent jump in revenue in the 16 weeks to January 7, 2023.

Engineering & technology firm Technip Energies N.V. has also dipped despite bagging a contract from Saudi Aramco to upgrade sulfur recovery facilities at Aramco’s Riyadh oil refinery.

U.S. Economic Reports

The Treasury Department is scheduled to announce the results of this month’s auction of $42 billion worth of two-year notes at 1 pm ET.

Stocks In Focus

Shares of Lyft (LYFT) are seeing notable pre-market strength after KeyBanc upgraded its rating on the ride-sharing company’s stock to Overweight from Sector Weight.

Defense giant Lockheed Martin (LMT) may also move to the upside after reporting fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Lululemon (LULU) are likely to see initial weakness after Bernstein downgraded its rating on the athletic apparel retailer to Underperform from Market Perform.

Chipmaker Advanced Micro Devices (AMD) may also give back ground after Bernstein downgraded its rating on the company’s stock to Market Perform from Outperform.